pri Provident Fund – A summary Note Provident Fund – A summary Note

Provident fund is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act 1952).

It extends to whole of India except the state of Jammu and Kashmir. It is applicable to every establishment which is a factory engaged in any industry specified in Schedule I and in which 20 or more persons are employed; and such other class of establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf.

An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty.

Provident Fund


Section 2 of EPF & MP Act 1952, clause:

(e) “Employer” means-

(i) In relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and, where a person has been named as a manager of the factory; and

(ii) In relation to any other establishment, the person who, or the authority which, has been ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, managing directing or managing agent, such manager, managing director or managing agent;

(f) “employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment and who gets his wages directly or indirectly from the employer, and includes any person

(i) Employed by or through a contractor in or in connection with the work of the establishment;

(ii) Engaged as an apprentice, not being an apprentice engaged under the Apprentice Act, 1961 (52) of 1961) or under the standing orders of the establishment];


> All employees are eligible for becoming the member of PF who is employed in an establishment (includes employees employed through contractors, daily rated, piece rated, temporary, casual etc.).

Excluded employees” need not be enrolled as PF members.

Excluded employees are –

a) Employee who drawing the wages (Basic + DA + Cash value of food concession) above Rs.15000/- as on the date of joining the establishment. (If the ‘wages’ of an employee is increased beyond Rs.15000 during the course of employment and after becoming a member of Employees’ Provident Fund, such employees are not to be treated as excluded employees. In such cases his contribution may be restricted to his wages up-to Rs.15000/-.

b) Employees whose Employees’ Provident Fund Accounts were once fully settled after attaining 55 years of Age or on permanent settlement abroad.

> Employees drawing wages above Rs.15000/- can also become a member of the Fund, if the employer and employee give a ‘joint declaration’ to the Regional Provident Fund Commissioner.

> Employees may voluntarily opt to contribute beyond the wage ceiling of Rs.15,000/- (i.e. up-to his ‘wages’). In such cases, an employer is not required to pay his own share of contribution above the wage ceiling of Rs.15,000/-.


> The contribution which shall be paid by the employer to the Provident fund shall be 12% / 10% * of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contactor) and the employee’s contribution shall be equal to the contribution payable by the employer.

*10 % in case of certain establishments (Jute, Beedi, Bricks, Coir industry, Gaur gum industries) and also to any establishment which employs less than 20 persons.

> Basic Wages means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case, in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include

(i)  The cash value of food concession;

(ii) Any DA, HRA, overtime allowance, bonus, commission or any other similar allowance payable to the employee;

(iii) any presents/gifts made by the employer;

> Employer shall pay the amount of contribution within 15 days of the close of every month pay to the PF Authority which is authorized for collection on account of contributions and administrative charge.

> Interest on PF contribution @8.50 % PA for the FY 2019-20.


We can say, Gross wages – [Canteen charges – DA – HRA -Overtime allowance – bonus- commission – any gift from employer] = Basic Wages

While for computing the amount on which PF calculated:

Basic Wages + [DA] + [Retaining allowances (allowances paid to all employees)]


Mr. X and Y, respectively, has the followings bifurcation of their salaries statement for the month of April 2020:

1 2 3 4 5 6 7 8 9
No. of days pre sent Basic Salary HRA Special Allo wance Edu cation allo wance Medical allo wance Leave travel allo wance (LTA) Perfo rmance allo wance Canteen
30 8251 2476 200 300 500 200 11897 40
30 8000 3000 200 300 500 200 5000 40

10 11


12 13 Crux
Gross Salary Salary after deducting Net HRA, Net LTA & Canteen Charges Statutory limit (Maximum limit for computation of PF) Computation of PF @12% on [ (11) or (12), W.E.L subject to maximum 15000] PF is calculated on

a). 15000; or

b). Basic wages – HRA, LTA & other variable allowances


But subject to Maximum Rs. 15000.

23894 21178 15000 1800
17240 14000 15000 1680


  • On leaving an employment

Employee can leave the organization because of two reasons:

(a) Either Retired at the age of 55 years: In this employee made

(b) Re-join the other organization: A Provident Fund member, on leaving an establishment and joining another establishment (Whether the Act is applicable or not) can seek transfer of his Provident Fund balances to his new Provident Fund account opened in the transferee establishment.

  • On death of a member to his/her nominee or legal heir(s).
  • Retirement on account of permanent and total incapacity for work due to bodily or mental infirmity duly certified by the medical officer of establishment;
  • Immediately before migration from India for permanent settlement abroad;
  • On termination of service in the case of mass or individual retrenchment;
  • On termination of service under a voluntary scheme of retirement framed by the employer and the employees under a mutual agreement specifying;
  • Any other reason as may be specified under the Act;

> The actual payment shall be made only after completing a continuous period of not less than two months immediately preceding the date on which a member makes the application for withdrawal.


UAN stands for Universal Account Number to be allotted by EPFO. The UAN will act as an umbrella for the multiple Member IDs allotted to an individual by different establishments. The idea is to link multiple Member Identification Numbers (Member Id) allotted to a single member under single Universal Account Number.

UAN will help the member to view details of all the Member Identification Numbers (Member Id) linked to it. If a member is already allotted (UAN then he/she is required to provide the same on joining new establishment to enable the employer to in-turn mark the new allotted Member Identification Number (Member Id) to the already allotted Universal Identification Number (UAN).

UAN has been made mandatory for all employees and will help in managing the EPF account and even PF transfer and withdrawals will become much easier than before. Remember, in most cases, the employer provides the UAN and the employee just has to get it activated by providing relevant KYC documents to the employer.


A consolidated return specifying the employees entitled to become the member of the PF Fund showing the details of basis wages, retaining allowance, DA including other cash food emolument.

If there is no employee who is entitled to become the member then furnish the “NIL” return

Within 15 days of commencement of this Act. Commissioner
The employees qualifying to become members of the Fund for the first time during the preceding month. Within 15 days from close of each month Commissioner
The employees leaving service of the employer during the preceding month Within 15 days from close of each month Commissioner
If there is no employee qualifying to become a member of the Fund for the first time or there is no employee leaving service of the employer during the preceding month- Furnish “NIL” Return Within 15 days from close of each month Commissioner
Particulars of change in branches and departments, owners, occupiers, directors, partners, manager or any other person(s) whose ultimate control over the establishment. Within 15 days of such changes Commissioner
Payment of Contribution to the PF fund by the employer Within 15 days from the close of every month Commissioner
A monthly abstract returns the aggregate amount of recoveries made from the wages of all the members and the aggregate amount contributed by the employer in respect of all such members for the month.

NIL return if no such recoveries made.

Within twenty-five days of the close of the month Commissioner
The employer shall require to file the consolidated annual contribution statement in Form-6A along with form 3A To be filed by the 30th of April every year Commissioner


S. No. Section/Rule Subject Provisions
1 Section 7Q of [EPF & MP Act 1952] Interest The employer shall be liable to pay SI @ 12% PA or such other rate as may be specified

-on amount due for contribution

-from the date on which the amount has become so due till date of its actual payment.

2 Rule 32A of Employees’ Provident Funds Scheme, 1952 Rate of Damages charged by the Commissioner or any officer on his behalf
Period of Default Rate of Damages (% of arrears per annum)
Less than 2 months 5%
2 months & above but less than 4 months 10%
4 months & above but less than 6 months 15%
6 months & above 25%
3 Section 8B of EPF & MP Act 1952 Recovery of Arrears by Recovery Officer (a) Attachment and Sale of the moveable or immovable property of the

-establishment; or

-the Employer;

Provided that the attachment and sale of any property shall first be against the properties of the establishment and if it is insufficient, the Recovery Officer may recover against the property of the employer.

(b) Arrest of the employer and his detention in prison;

“Employer” means-

(i) In case of factory, the owner or occupier of the factory, including the agent of such owner or occupier, and where a person has been named as a manager of the factory and

(ii) In relation to any other establishment, the person who is ultimate control and where the said affairs are entrusted to a manager, managing directing or managing agent, such manager, managing director or managing agent;]

4 Section 8E of EPF & MP Act 1952 Other modes of Recovery 1. Realisation of dues from Debtors.

2. Attachment of Bank Account

3. He may apply to the court in whose custody there is money belonging to the employer for payment to him of the entire amount sufficient to discharge the amount due.

5 Section 14(1A) of EPF & MP Act 1952 Penalties for default in making the contribution as specified under Section 6 of EPF & MP Act 1952 Imprisonment for a term which may extend to three years but which shall not be less than one year and a fine of ten thousand rupees.

Provided that the Court may, for any adequate and special reasons to be recorded in the judgement, impose a sentence of imprisonment for a lesser term.

6 Section 14(2) & (2A) of EPF & MP Act 1952 General Penalties (1) Any person who contravenes or makes default in complying with, any of the provisions thereof shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to four thousand rupees, or with both.

(2) Whoever, contravenes or makes default in complying with any provision of this Act shall, if no other penalty is elsewhere provided be punishable with imprisonment which may extend to 6 months, but which shall not be less than one month, and shall be liable to fine which may extend to five thousand rupees.

7 Section 14AB of EPF & MP Act 1952 Arrest without warrant An offence relating to default in payment of contribution by the employer punishable under this Act shall be cognizable.
8 Section 14B of EPF & MP Act 1952 Power to recover damages Where an employer makes default in the payment of contribution the Central Provident Fund Commissioner or such other officer in his behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears but reasonable opportunity of being heard shall be given.
9 Section 110 Criminal Procedure Code 1973 Execution of sureties Bond In case of default in compliance of this Act (in addition to other Acts) magistrate may require such person to show cause why he should not be ordered to execute a bond, with sureties, for his good behaviour for such period, not exceeding three years, as the Magistrate thinks fit.

> Who else shall be responsible for default in making the contribution in Provident Fund?

As per Section 14A(1) of EPF & MP Act 1952, if the person committing an offence under Act or scheme,  is a company, every person, who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.



1. These are the nature of variable expenses.

2. The Dearness Allowance is a calculation on inflation and allowance paid to government employees, public sector employees and pensioners in India.

3. Retaining allowance generally included in the Basic salaries it has the nature of fixed allowances.

4. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

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